What is a Deferment Letter Due to COVID-19?
Taking out a loan and finding out that you may not be able to pay it back on time may require you to write a deferment letter. In a deferment letter, you inform your lender that you can’t pay back your loan right away. If your deferment request is approved, you can pay back the loan at a later date, although interest will accumulate in the meantime.
There are many different reasons for hardships, in recent years COVID-19 has impacted many peoples financial situation so they need to help with payments. So if you’re looking for deferment letter due to COVID-19, you’ve come to the right spot.
Can You Defer Payment on a Personal Loan?
For people experiencing financial hardship, many lenders offer short-term deferment plans that will allow them to extend the term of their loan in exchange for a break from their regular monthly payment.
When you defer your payments on the loan you are extending the loan without breaking agreements you signed when getting the loan. Some lenders offer an interest free option for deferment of the loan, while others still charge interest during the deferment period.
Whatever amount you decide to defer the loan for, those months will be added on to the end of your loan.
How do I Postpone My Loan Payment?
You should contact your lender and request deferred loan payments even during a crisis. Late payments or skipping payments entirely without notifying your lender can impact your credit and cause your loan to go into default.
You may be required to log in, email or call a lender to explain your hardship in order to defer payments. Many lenders do not disclose specific requirements for who can defer a loan. In some cases, lenders cannot approve hardship applications right away, especially if a number of borrowers submit them at the same time.
How do I Ask for a Loan Payment Extension?
First identify the loans that you want to defer. Figure out how much your loan is and how many payments you are wanting to skip.
Next you will want to contact the lender for those loans to let them know exactly what is going on. Make sure before you call that you know what your financial situation is:
- How much you can pay when you call
- When you expect your situation to improve
- When you will be able to continue making payments like normal.
There are a few ways you can ask to extend the loan by simply changing the due date. This will allow you to have a few extra weeks to get the money to make the bill on time. You can defer the payments and add them on the end of your loan; however, there are typically requirements to qualify for this type of extension.
Lastly, ask your lender if they have a payment plan or reduced payment. Any of these may be helpful ways to get you help with your payments when you are experiencing financial hardships.
Does Deferring a Loan Hurt Your Credit?
In most cases, your credit score won’t be affected by deferring personal loan payments because lenders aren’t supposed to report them as missed or late to credit bureaus.
Still be sure to check online for free to see if things have not been recorded correctly on your credit score. However, if the lender has not approved your request for deferment and you stop paying, your credit score will be negatively affected.
To begin the deferment process, lenders usually make changes to your account. Whenever you apply for hardship and your payment is due before the lender makes a decision, it is best to make the payment as soon as possible to avoid negatively affecting your credit score.
What is the Difference Between Deferment and Forbearance?
There are some differences in how deferment and forbearance work, but both offer ways to postpone loan payments. Most commonly, forbearance is when you don’t continue to accumulate interest. Deferment usually requires a qualifying event and proof of hardship.
If you get approved or not is up to the lender. This is usually the longer and first option for many people. Depending on the lender and type of loan, these terms can be used differently. You should always know the exact terms of a contract before signing it.